AEG<
> AEG <
> AEG - Aveng Group Limited - Unaudited group results for the six months ended <
> 31 December 2011 <
> AVENG GROUP LIMITED <
> Leaders in infrastructure development <
> Registration number 1944/018119/06 <
> Share code: AEG <
> ISIN code: ZAE000111829 <
> Unaudited group results for the six months ended 31 December 2011 <
> Revenue up 13,4% <
> Headline earnings down 34% <
> Two year order book growth up 49,2% <
> Strong balance sheet with net cash of ZAR4,8bn <
> Interim consolidated statement of financial position <
> 31 December 31 December 30 June <
> 2011 2010 2011 <
> (Unaudited) (Unaudited) (Audited) <
> Rm Rm Rm <
><
> ASSETS <
> Non-current assets <
> Property, plant and equipment 6 252 5 563 6 021 <
> Goodwill and other intangibles 1 530 1 436 1 481 <
> Investment in associates and 110 97 92 <
> joint ventures <
> Available-for-sale investments 149 125 131 <
> Deferred tax 445 461 1 019 <
> 8 486 7 682 8 744 <
> Current assets <
> Inventories 2 550 1 877 2 067 <
> Trade and other receivables 9 515 6 345 8 132 <
> Taxation receivable 53 <
> Cash and cash equivalents 5 260 6 146 5 611 <
> 17 325 14 421 15 810 <
> TOTAL ASSETS 25 811 22 103 24 554 <
> EQUITY AND LIABILITIES <
> Capital and reserves <
> Equity attributable to ordinary 13 145 11 895 12 917 <
> shareholders of Aveng Limited <
> Non-controlling interests (6) 5 (2) <
> 13 139 11 900 12 915 <
> Non-current liabilities <
> Interest-bearing borrowings 53 2 48 <
> Deferred tax 163 188 832 <
> 216 190 880 <
> Current liabilities <
> Trade and other payables 11 937 9 323 10 349 <
> Interest-bearing borrowings 409 690 246 <
> Taxation payable 110 - 164 <
> 12 456 10 013 10 759 <
> TOTAL EQUITY AND LIABILITIES 25 811 22 103 24 554 <
> Net debt to equity ratio (%) (37) (46) (41) <
> Net asset value per ordinary 3 273 3 017 3 287 <
> share (cents) <
> Interim consolidated statement of comprehensive income <
> Six months Six months Year <
> ended ended ended <
> 31 December 31 December 30 June <
> 2011 2010 2011 <
> (Unaudited) (Unaudited) % (Audited) <
> Rm Rm change Rm <
><
> Revenue 19 149 16 892 13% 34 324 <
> Operating profit before 1 066 1 053 1% 2 615 <
> depreciation and <
> amortisation <
> Depreciation 719 531 1 101 <
> Amortisation of 15 9 24 <
> intangibles <
> Operating profit before 332 513 (35%) 1 490 <
> non-trading items <
> Non-trading items * * (14) <
> Operating profit 332 513 (35%) 1 476 <
> Share of profits and 15 7 (7) <
> losses from associates <
> and joint ventures <
> Income from investments 133 197 347 <
> Operating income 480 717 (33%) 1 816 <
> Finance cost 28 20 59 <
> Profit before taxation 452 697 (35%) 1 757 <
> Taxation 182 281 584 <
> Profit for the period 270 416 (35%) 1 173 <
> Other comprehensive <
> (loss)/income for the <
> period <
> Exchange differences on 515 (97) 209 <
> translation of foreign <
> operations <
> Total comprehensive 785 319 146% 1 382 <
> income for the period <
> Profit attributable to: <
> Equity holders of Aveng 274 416 1 177 <
> Limited <
> Non-controlling (4) * (4) <
> interests <
> Profit for the period 270 416 (35%) 1 173 <
> Total comprehensive <
> income attributable to: <
> Equity holders of Aveng 789 319 1 386 <
> Limited <
> Non-controlling (4) * (4) <
> interests <
> Total comprehensive 785 319 146% 1 382 <
> income for the period <
> *Amounts less than R1 <
> million <
> Determination of <
> headline earnings <
> Profit for the year 274 416 1 177 <
> attributable to equity <
> holders of Aveng <
> Limited <
> Non-trading items net * * 14 <
> of taxation <
> Surplus on disposal of <
> property, plant and <
> equipment <
> Headline earnings 274 416 (34%) 1 191 <
> Interim consolidated statement of cash flows <
> Six months Six months Year <
> ended ended ended <
> 31 December 31 December 30 June <
> 2011 2010 2011 <
> (Unaudited) (Unaudited) (Audited) <
> Rm Rm Rm <
> Operating activities <
> Cash retained from 332 513 1 476 <
> operations <
> Depreciation and 734 540 1 125 <
> amortisation <
> Non-cash items (147) (146) (171) <
> Cash generated by operations 919 907 2 430 <
> Income from investments 133 197 347 <
> (Increase)/Decrease in (686) (805) (1 873) <
> working capital <
> Cash generated by operating 366 299 904 <
> activities <
> Finance cost (28) (20) (59) <
> Taxation paid (284) (440) (455) <
> Cash available from 54 (161) 390 <
> operating activities <
> Dividends paid (561) (565) (565) <
> Net cash flows (utilised (507) (726) (175) <
> in)/from operating <
> activities <
> Investing activities <
> Property, plant and <
> equipment purchased <
> - expansion (640) (206) (1 140) <
> - replacement (204) (728) (678) <
> Proceeds on disposal of 46 43 88 <
> property, plant and <
> equipment <
> Purchase of subsidiaries (18) (285) (285) <
> Purchase of other (18) (31) <
> investments <
> Investment in associate 26 14 15 <
> companies <
> Net cash flows utilised in (808) (1 193) (2 000) <
> investing activities <
> Financing activities <
> Borrowings advanced/(repaid) 11 (159) (254) <
> Shares repurchased (74) (117) <
> Net cash flows utilised in 11 (233) (371) <
> financing activities <
> Net decrease/(increase) in (1 304) (2 152) (2 546) <
> cash and cash equivalents <
> Cash and cash equivalents at 5 400 7 631 7 631 <
> beginning of year <
> Foreign currency translation 796 106 315 <
> reserve movement <
> Cash and cash equivalents at 4 892 5 585 5 400 <
> end of period <
> Cash and cash equivalents as 5 260 6 146 5 611 <
> per balance sheet <
> Overdrafts disclosed under (368) (561) (211) <
> short term borrowings <
> Cash and cash equivalents at 4 892 5 585 5 400 <
> end of period <
> Interim consolidated statement of changes in equity <
> Year ended 30 June 2010 (Audited) <
> Foreign <
> Share capital currency Other non- <
> And Trans- Distri- <
> share lation butable <
> premium reserve reserve <
> Rm Rm Rm <
><
> Balance at 1 July 2010 2 001 (145) 68 <
> Foreign currency <
> translation <
> Profit for the year (97) <
> Total comprehensive income - (97) - <
> Dividends paid <
> Share repurchase programme (74) <
> Balance at 31 December 2010 1 927 (242) 68 <
> Balance at 1 July 2010 2 001 (145) 68 <
> Profit for the year <
> Other comprehensive 207 2 <
> income/(loss) <
> Total comprehensive income - 207 2 <
> Dividends paid <
> Share repurchase programme (118) <
> Acquisition during the year <
> Transfers 2 <
> Balance at 30 June 2011 1 883 62 72 <
> Six months ended 31 <
> December 2011 (Unaudited) <
> Balance at 1 July 2011 1 883 62 72 <
> Profit for the year <
> Other comprehensive <
> income/(loss) <
> - Foreign currency 515 * <
> translation <
> Total comprehensive income - 515 * <
> Dividends paid <
> Shares issued <
> Balance at 31 December 2011 1 883 577 72 <
> Interim consolidated statement of changes in equity (continued) <
> Year ended 30 June 2010 (Audited) <
> Non- <
> Retained controlling Total <
> income Total interest equity <
> Rm Rm Rm Rm <
><
> Balance at 1 July 2010 10 291 12 215 5 12 220 <
> Foreign currency 416 416 * 416 <
> translation <
> Profit for the year (97) (97) <
> Total comprehensive 416 319 - 319 <
> income <
> Dividends paid (565) (565) * (565) <
> Share repurchase (74) * (74) <
> programme <
> Balance at 31 December 10 142 11 895 5 11 900 <
> 2010 <
> Balance at 1 July 2010 10 291 12 215 5 12 220 <
> Profit for the year 1 177 1 177 (4) 1 173 <
> Other comprehensive 209 209 <
> income/(loss) <
> Total comprehensive 1 177 1 386 (4) 1 382 <
> income <
> Dividends paid (566) (566) * (566) <
> Share repurchase (118) (118) <
> programme <
> Acquisition during the - (3) (3) <
> year <
> Transfers (2) - - <
> Balance at 30 June 2011 10 900 12 917 (2) 12 915 <
> Six months ended 31 <
> December 2011 (Unaudited) <
> Balance at 1 July 2011 10 900 12 917 (2) 12 915 <
> Profit for the year 274 274 (4) 270 <
> Other comprehensive <
> income/(loss) <
> - Foreign currency 515 515 <
> translation <
> Total comprehensive 274 789 (4) 785 <
> income <
> Dividends paid (561) (561) * (561) <
> Shares issued <
> Balance at 31 December 10 613 13 145 (6) 13 139 <
> 2011 <
> *Amounts less than R1 million. <
> Capital expenditure <
> Six months Six months Year <
> ended ended ended <
> 31 December 31 December 30 June <
> 2011 2010 % 2011 <
> Rm Rm change Rm <
><
> Expansion 204 206 1 140 <
> Maintenance 640 728 678 <
> 844 934 1 818 <
> Commitments for future <
> capital expenditure: <
> Contracted 362 40 525 <
> Authorised, but not 69 63 541 <
> contracted for <
> 431 103 1 066 <
> Share performance <
> Earnings per share <
> (cents) <
> Earnings 70,8 107,0 (34%) 302,9 <
> Earnings - diluted 67,6 98,2 (31%) 283,3 <
> Headline 70,6 106,9 (34%) 306,4 <
> Headline - diluted 67,5 98,2 (31%) 286,6 <
> Number of shares <
> (millions) <
> In issue 401,6 394,3 393,0 <
> Weighted average 387,0 388,8 388,7 <
> Diluted weighted 405,2 423,2 415,5 <
> average <
> Dividend per share Nil Nil 145,0 <
> (cents) <
> Segmental analysis <
> Six months Six months Year <
> ended ended ended <
> 31 December 31 December 30 June <
> 2011 2010 2011 <
> (Unaudited) (Unaudited) (Audited) <
> Rm Rm Rm <
><
> Business segmentation <
> Revenue <
> Construction and Engineering <
> South Africa and Africa 5 084 4 993 9 575 <
> Australasia and Pacific 7 641 6 419 13 281 <
> Total Construction and 12 725 11 412 22 856 <
> Engineering <
> Opencut mining 2 134 1 788 3 656 <
> Manufacturing and Processing 4 290 3 690 7 807 <
> Administration * 2 5 <
> 19 149 16 892 34 324 <
> Operating profit <
> Construction and Engineering <
> South Africa and Africa (61) 253 443 <
> Australasia and Pacific 128 133 291 <
> Total Construction and 67 386 734 <
> Engineering <
> Opencut mining 234 208 414 <
> Manufacturing and Processing 277 (24) 321 <
> Administration (246) (57) 7 <
> 332 513 1 476 <
> Notes to the interim condensed consolidated financial statements <
> 1. Corporate information <
> The interim consolidated financial statements of the Group for the six months <
> ended 31 December 2011 were authorised for issue in accordance with a <
> resolution of the directors on 12 March 2012. <
> Aveng Limited is a limited liability company incorporated and domiciled in <
> the Republic of South Africa whose shares are publicly traded. <
> 2. Basis of preparation and accounting policies <
> Basis of preparation <
> The interim consolidated financial statements for the six months ended 31 <
> December 2011 have been prepared in accordance with International Financial <
> Reporting Standards (IFRS) and the Listing Requirements of the JSE Securities <
> Exchange South Africa. <
> The interim condensed consolidated financial statements comply with IAS 34 <
> Interim Financial Reporting and do not include all the information and <
> disclosures required in the annual financial statements, and should be read <
> in conjunction with the Group's annual financial statements as at 30 June <
> 2011. <
> The preparation of the Group's condensed consolidated reviewed results were <
> supervised by the Chief Financial Officer, HJ Verster. <
> Significant accounting policies <
> The accounting policies adopted are consistent with those of the previous <
> financial year. <
> Amendments resulting from Improvements to IFRSs to the following standards <
> did not have any impact on the accounting policies, financial position or <
> performance of the Group: <
> - IAS 24 Related party disclosures (Amendment) - 1 January 2011 <
> - IFRIC 14 Prepayments of a minimum funding requirement (Amendment) <
> - Improvements to IFRSs (issued in May 2010) <
> 3. Segment Information <
> Revenue and expenses are attributed directly to the segments to which they <
> relate. Segment assets include all operating assets used by a segment, and <
> consist principally of property, plant and equipment, as well as current <
> assets. Segment liabilities include all operating liabilities and consist <
> principally of trade and other payables. These assets and liabilities are all <
> directly attributable to the segments. <
> Management monitors the operating results of its business units separately <
> for the purpose of making decisions about resource allocation and performance <
> assessment. Segment performance is evaluated based on operating profit or <
> loss which in certain respects is measured differently from the operating <
> profit or loss in the consolidated financial statements. <
> Transfer prices between operating segments are on an arm's length basis in a <
> manner similar to transactions with third parties. <
> 4. Impairments <
> The carrying amounts of assets are reviewed at each reporting date to <
> determine whether there is any indication of impairment. If any such <
> indication exists, or when annual impairment testing of an asset is required, <
> the recoverable amount is estimated as the higher of the fair value less <
> cost to sell and the value in use. <
> In determining fair value less costs to sell, an appropriate valuation model <
> is used. In assessing value in use, the expected future cash flows are <
> discounted to the present value using a pre-tax discount rate that reflects <
> current market assessments of the time value of money and the risks specific <
> to the asset. An impairment loss is recognised whenever the carrying amount <
> exceeds the recoverable amount. Impairment losses and reversal of impairment <
> losses are separately disclosed in the profit or loss, above the income <
> before tax subtotal. <
> For an asset that does not generate cash inflows that are largely independent <
> of those from other assets, the recoverable amount is determined for the cash <
> generating unit to which the asset belongs. An impairment loss is recognised <
> whenever the carrying amount of the cash generating unit exceeds its <
> recoverable amount. <
> A previously recognised impairment loss is reversed if there has been a <
> change in the estimates used to determine the recoverable amount, however, <
> not to an amount higher than the carrying amount that would have been <
> determined (net of depreciation) had no impairment loss been recognised in <
> prior years. <
> Goodwill impairment losses are not reversed. <
> 5. Income tax <
> The major components of income tax expense in the interim consolidated <
> statement of comprehensive income are: <
> Six months Six months Year <
> ended ended ended <
> 31 December 31 December 30 June <
> 2011 2010 2011 <
> Rm Rm Rm <
><
> Current income tax <
> Current income tax charge 173 150 382 <
> Secondary tax on companies 57 57 57 <
> Deferred tax <
> Relating to origination and (48) 74 145 <
> reversal of temporary <
> differences <
> Income tax expense 182 281 584 <
> 6. Property, plant and equipment <
> During the six months ended 31 December 2011, the Group acquired assets with <
> a cost of R844,1 million (December 2010: R933.6 million). <
> 7. Cash and cash equivalents <
> For the purpose of the interim consolidated statement of cash flows, cash and <
> cash equivalents are comprised of the following: <
> Six months Six months Year <
> ended ended ended <
> 31 December 31 December 30 June <
> 2011 2010 2011 <
> Rm Rm Rm <
> Deposits and cash 5 260 6 146 5 611 <
> Bank overdraft (368) (561) (211) <
> 4 892 5 585 5 400 <
> 8. Related party transactions <
> During the year the company and its subsidiaries, in the ordinary course of <
> business, entered into various sale and purchase transactions with associated <
> companies and joint ventures. Those transactions occurred under terms that <
> are no less favourable than those arranged with third parties. <
> There were no related party transactions with directors or entities in which <
> the directors have a material interest. <
> OVERVIEW <
> Safety <
> The Aveng Group remains committed to the pursuance of its safety vision; <
> 'Home Without Harm, Everyone Everyday'. Over this period, a further <
> improvement in the recordable injury frequency rate (RIFR) was recorded, with <
> RIFR decreasing from 1,22 for the year ended June 2011 to 1,14 for the half <
> year to December 2011 (December 2010: 1,3). <
> The Group regrets that it has to report five fatalities during the period <
> under review. The Aveng Group Board and Management extend their sincere <
> condolences to the families of our deceased colleagues. <
> Operating environment <
> The South African construction and engineering market continued to be <
> subdued, with further delays in infrastructure spend and limited large <
> project opportunities. The construction and engineering operating environment <
> in Australia and Pacific Rim remained buoyant, supported by strong global <
> demand for commodities and energy which drove significant growth in the <
> mining and energy related sectors. <
> The Group's diversified geographical footprint and broad product offering <
> served to mitigate some of the effects of the weak domestic infrastructure <
> market. Improved operating conditions in both the Opencut Mining and the <
> Manufacturing & Processing segments bolstered Group profitability and <
> partially offset the impact of low margins and project losses within the <
> Construction & Engineering segments. <
> Unresolved claims and execution difficulties on a number of large projects <
> adversely affected the performance of the Construction & Engineering <
> segments, contributing to a 34% decline in earnings for the period. <
> The Group's two year order book increased by 24% from R37 billion at 30 June <
> 2011 to R46 billion as of 31 December 2011, driven primarily by demand from <
> the mining and energy related sectors in Australia. <
> FINANCIAL PERFORMANCE <
> Revenue for the six months increased by 13% to R19,1 billion (2010: R16,9 <
> billion). The Opencut Mining, Manufacturing & Processing, and Construction &<
> Engineering: Australia and Pacific business segments all recorded solid <
> revenue growth while Construction & Engineering: South Africa's revenue <
> performance was in line with the prior period. <
> Despite the higher revenue, the impact of problematic contracts resulted in a <
> 35% decline in operating profit to R332 million (2010: R513 million. A <
> resultant operating profit margin of 1,7% was recorded for the half year <
> (2010:3,0%). <
> The Group's net income from investments reduced by 32% to R133 million (2010: <
> R197 million) as a consequence of lower cash balances and prevailing low <
> interest rates. <
> Cash generated from operating activities increased to R366 million (2010: <
> R299 million). Net working capital reflected an outflow of R686 million <
> (2010: R805 million). The large movement in accounts payable and receivable <
> was largely as a consequence of non-cash items, arising from the translation <
> of the Groups foreign balance sheets. The movement in the net working <
> capital was due to increased project receivables, a decision to increase <
> inventory levels within the Manufacturing and Processing segment and <
> movements in project related provisions, which are included in Trade and <
> other payables. Major cash outflows included a dividend payment of R561 <
> million, a tax payment of R284 million and capital expenditure of R844 <
> million. The largest investment in capital was by McConnell Dowell and Aveng <
> Moolmans. R306 million was invested by McConnell Dowell on project specific <
> expenditure, including project capital for the QCLNG, Australia Pacific LNG <
> Pipeline and Vale Jetty projects. Aveng Moolmans invested R261 million, to <
> equip the Chimiwugu contract and for the maintenance of its current fleet of <
> equipment. <
> With a net cash position of R4,9 billion (2011: R5,4 billion) the Group's <
> financial position remains solid. It is well positioned to take advantage of <
> impending growth prospects. Liquidity management continues to be a key <
> priority, with a focus on converting unresolved claims into cash and reducing <
> inventories in line with greater reliability in steel supply. <
> Headline earnings declined by 34% from R416 million to R274 million, <
> translating into headline earnings per share of 70,6 cents (2010: 106,9 <
> cents). <
> OPERATIONAL REVIEW <
> Construction and Engineering: South Africa <
> This business segment comprises Aveng Grinaker LTA Building, Civil <
> Engineering, Earthworks Engineering, Mechanical & Electrical, Mining, Aveng <
> Water and Aveng E+PC divisions. <
> Revenue for this segment was consistent with last year at R5 billion. The <
> segment however reported an operating loss for the period of R61 million <
> (2010: Profit R253 million) due to contract provisions and unresolved claims <
> on major contracts. The South African construction two year order book, which <
> is comprised primarily of private sector contracts, contracted by 24%. This <
> is as a result of a difficult and competitive local infrastructure market and <
> project delays, on projects such as the KCM Konkola CRO plant in Zambia. <
> Revenue from the Building and Mechanical & Electrical divisions improved by <
> 16% and 15% respectively, despite project delays and continued difficulties <
> experienced on the sub-contracted steel fabrication projects for the Medupi <
> and Kusile power plants. Unresolved claims, within the Mechanical &<
> Electrical division, on these two projects adversely impacted both <
> profitability and liquidity during the period. <
> The Group is aware of the reported settlement between Genrec, the main sub- <
> contractor and the main contractor and is pursuing entitlements against the <
> sub-contractor in terms of the contractual framework. The Group will engage <
> all parties in this regard and pursue all contractual and legal remedies <
> available. <
> Revenue generated by the Civil Engineering and Earthworks Engineering <
> divisions declined by 15% and 29% respectively. The Civil Engineering <
> division of Aveng Grinaker-LTA continued work on the Medupi and Kusile power <
> stations. As previously reported, the terms and complexity of the Medupi <
> power station contracts have resulted in numerous claims and additional <
> entitlements which have caused material delays in revenue and profit <
> recognition. Discussions with the client are currently underway to reach a <
> settlement in respect of these issues. <
> Revenue at Earthwork Engineering was affected by the shortage in bitumen and <
> asphalt, the slow start-up of the Mokolo project and the high revenue base <
> recorded on the Gauteng Improvement Project in the comparative period. <
> Underground mining revenue improved by 5% to R1,0 billion on the comparative <
> period as a result of both shaft sinking and development contracts secured <
> during the previous financial year now being in full production. The <
> resolution of underperforming mining contracts resulted in an improved <
> earnings contribution. <
> Construction and Engineering: Australasia & Pacific <
> This business segment comprises McConnell Dowell Construction, Tunnelling, <
> Electrical and Pipeline divisions. <
> McConnell Dowell's revenue increased by 19%, to R7,6 billion, boosted by an <
> Australian dollar that has strengthened by 17% against the Rand over the <
> comparable period. In Australian dollar terms the growth was relatively flat <
> at 2%, despite a strong level of work in hand caused by delays in project <
> start up. The McConnell Dowell business reported a record work in hand of R30 <
> billion and continue to experience good project opportunities, particularly <
> off the resources sector growth in Australia and Asia. The Company is well <
> placed, given its geographical and capability profile to win a significant <
> amount of this work, in spite of tougher commercial conditions and increased <
> competition. <
> After experiencing site access delays and adverse weather conditions, the <
> QCLNG export pipeline project has not yet reached planned productivity. <
> McConnell Dowell has made provision to cover the expected financial impact of <
> the project during the six month period. The project is still in an early <
> phase of completion and therefore continues to pose a material risk. <
> The Adelaide Desalination project is nearing completion with physical work <
> largely complete by July 2012 progressing to full commissioning by December <
> 2012. The further delay in completion has resulted in an additional loss <
> provision during the six months period. The Group does not anticipate any <
> further losses on this project, during the period, R15 billion of new work <
> was secured, which includes: <
> - Australia Pacific LNG Pipeline & facilities, Queensland <
> - GLNG Upstream Roma Hub, Queensland <
> - Vale Jetty, Malaysia <
> - Waterview Connection Project, New Zealand <
> - Stronger Christchurch Infrastructure Rebuild, New Zealand <
> Revenue in Construction Australia was down 6,0%, in AUD terms, on the <
> comparative period. The Australian business experienced a reduction in <
> reported revenue due to delays in project commencements, delayed revenue <
> recognition and the 'knock-on' effect of the previous year's flooding. <
> Offshore Construction increased revenue by 35% due to strong performance from <
> South East Asia, New Zealand and the Pacific Islands. Markets in the Middle <
> East remain highly competitive. McConnell Dowell's offshore revenue was <
> negatively impacted by the significant appreciation in the Australian dollar. <
> Although Pipeline revenue was up by 15% the slower than expected progress on <
> the QCLNG pipeline project has limited profit recognition. A number of large <
> projects will go into full activities in the fourth quarter with strong <
> revenue expected for the rest of the year into 2013. <
> Electrix's revenue was up 15% and the business unit is experiencing a strong <
> workload across all areas in both New Zealand and Australian operations, <
> resulting in good top-line growth. They have renewed maintenance contracts <
> with most of their long-term customer base in the electrical sector and have <
> continue to successfully diversify into gas maintenance. <
> Tunneling was successful as part of the Well Connected Consortium in winning <
> New Zealand Transport Agencies' largest ever transport project, the Waterview <
> Connection Alliance. Revenue for the period was down by 34% reflecting a lack <
> of new work secured in 2011 and the slow start to the Waterview Alliance <
> project, which is expected to contribute to earnings in the 2014 financial <
> year. <
> Aveng Moolmans <
> Aveng Moolmans increased its revenue by 19% to R2,1 billion (2010: R1,8 <
> billion) and operating profit by 13%. The improvement in performance is not- <
> withstanding the once off Marikana (Aquarius Platinum) settlement receipt of <
> R87,5 million in the previous reporting period. The turnaround of <
> underperforming contracts, improved plant utilisation and efficiencies also <
> contributed to a solid performance from the opencut mining operations. <
> While the order book has remained flat in comparison to June 2011, the <
> outlook is positive given the ongoing demand for minerals. The Group awaits <
> the award of two large projects which will improve the work on hand. <
> Manufacturing & Processing <
> This business segment comprises Aveng Manufacturing and Aveng Trident Steel <
> (Pty) Limited. <
> The performance of the Aveng Manufacturing and Processing businesses, which <
> includes Aveng Trident Steel, improved significantly despite a soft domestic <
> infrastructure market, steel supply constraints and labour disruptions. <
> Revenue increased by 16% to R4,3 billion (2010: R3,7 billion). Operating <
> profit for the period improved substantially to R277 million, following last <
> year's reported loss of R24 million which included the provision for a <
> Competition Commission administrative penalty of R129 million. <
> With the exception of Aveng Manufacturing: Infraset, revenue and <
> profitability improved in all other units within the Aveng Manufacturing &<
> Processing cluster. The operating results benefited from various efficiency <
> improvements, asset rationalisation and optimisation initiatives implemented <
> during the past 12 months. <
> Aveng Trident Steel's revenue improved by 19% to R2,8 billion (2010:R2,3 <
> billion) on the back of improved steel prices. Steel volumes were however <
> negatively affected by the two week labour strike in July, as well as various <
> domestic steel supply disruptions. The impact on customers and financial <
> performance was lessened by the Group's decision to increase imports from <
> various international suppliers. <
> Aveng Water <
> July 2011 saw the official launch of the Aveng Water division. Aveng Water's <
> offering includes the design, construction, operation and maintenance of mine <
> water treatment plants (AMD), municipal water treatment, waste water <
> rehabilitation, sea water desalination and industrial effluent treatment. <
> Market interest indicates a growing demand for mine water treatment plants. <
> Aveng Water's HiPro water recovery process serves to strengthen the Group's <
> offering to the mine water treatment market. Recent projects awarded include <
> the eMalahleni phase 2 expansion and the Kromdraai Treatment plant. <
> Renewable Energy <
> The South African Department of Energy's sponsored renewable energy <
> procurement programme presents a significant opportunity for Aveng. Together <
> with its international partner, Acciona Energy, and broad-based empowerment <
> partners, the Group has submitted a bid for two projects in response <
> to the Department's second bid invitation for a wind and solar facility. <
> These projects, with a high local content, will impact positively on the <
> Group's domestic order book. <
> Administration <
> The administration segment reported an operating cost of R246 million for the <
> six month period (2010: R57 million). This increase is attributed to an <
> unrealized foreign exchange loss on the translation of inter group loans for <
> the period of R99 million (2010: profit R45 million), the "turn around" <
> effect of the R45 million profit included in the segment for the comparative <
> period and an interim portfolio provision of R50 million. <
> COMPETITION COMMISSION <
> The Aveng Group remains committed to cooperating and engaging with the <
> Competition authorities to resolve all historical anti-competitive practices, <
> and to eradicate any such practices from the industry. Subsidiary company, <
> Aveng (Africa) Limited submitted comprehensive applications in terms of the <
> Competition Commission's Fast Track Settlement Process, which are currently <
> under review by the Competition Commission. This process is expected to <
> culminate in clarity on this sector-wide issue during 2012. At this stage it <
> remains premature to speculate on the quantum of any possible settlement and <
> no provision has been raised. <
> BUSINESS OPTIMISATION <
> The Aveng Group is in the process of reorganising the business structure of <
> both its South African construction and mining businesses with a view to <
> improving its market approach and service to its customers. To this end, the <
> deep shaft sinking and underground mining operations, previously part of <
> Aveng Grinaker LTA, have been combined with Aveng Moolmans to form Aveng <
> Mining. The new consolidated mining division with its combined capabilities <
> of open cut, shaft sinking, incline development and underground mining is <
> well positioned to pursue opportunities in the fast growing mining sector <
> both locally <
> and internationally. <
> The appointment of key internationally experienced executives to drive a <
> focused growth strategy within Aveng Grinaker-LTA has been initiated and a <
> reorganisation process is under consideration which will ensure that the <
> business is optimally positioned for sustainable growth. <
> OUTLOOK AND PROSPECTS <
> The Aveng Group anticipates that the domestic infrastructure environment will <
> remain under pressure over the short to medium term until meaningful public <
> sector spend is more evident. The Group's two year order book indicates that <
> approximately 77% of the work over the period will be generated by its <
> foreign operations. <
> The Australian and Pacific Rim infrastructure market is expected to remain <
> strong on the back of continued infrastructure investment in the mining, oil <
> and gas sectors. This is reflected by a 62% increase in the McConnell Dowell <
> two year order book of R31 billion, which underpins the 24% increase in the <
> Groups construction order book to R46 billion. <
> The Manufacturing & Processing segment is well positioned to participate in <
> the anticipated increase in mining activity and rail infrastructure spend in <
> South and Southern Africa and is expected to continue its improved <
> performance over the short and medium term. Steel price volatility and the <
> general state of the domestic infrastructure market will also continue to <
> impact on the overall performance of this part of the business. <
> Aveng Mining is expected to build on its current performance. The recent <
> combination of the Group's open-cut mining, deep shaft sinking and <
> underground mining services capabilities into a single division is aimed at <
> improving both product and service offerings to its customers in the mining <
> sector. <
> Aveng remains well positioned both domestically and internationally to <
> participate in key infrastructural growth areas, including water technology, <
> power, rail and renewable energy. <
> By order of the Board <
> AWB Band WR Jardine HJ Verster <
> (Chairman) (Chief Executive Officer) (Financial Director) <
> 14 March 2012 <
> DISCLAIMER <
> This commentary contains forward-looking statements about the company's <
> operations and financial conditions. They are based on Aveng Limited's best <
> estimates and information at the time of writing. They are nonetheless <
> subject to significant uncertainties and contingencies many of which are <
> beyond the control of the company. Unanticipated events will occur and actual <
> future events may differ materially from current expectations due to new <
> business opportunities, changes in priorities by the company or its joint <
> ventures as well as other factors. Any of these factors may materially affect <
> the company's future business activities and its ongoing financial results. <
> DIRECTORSAWB Band* (Chairman), WR Jardine (Chief Executive Officer), <
> HJ Verster (Financial Director), JJA Mashaba, <
> DG Robinson (Australian), PJ Erasmus*#, MA Hermanus*#, <
> RL Hogben*#, TM Mokgosi-Mwantembe*#, MJD Ruck*#, <
> NL Sowazi*, PK Ward*# K Rumble - Resigned 1 December 2011(*non-executive) <
> (#independent) <
> COMPANY SECRETARY <
> iThemba Governance and Statutory Solutions (Pty) Ltd <
> REGISTERED OFFICE <
> 204 Rivonia Road, Morningside, Sandton, 2057 <
> REGISTRARS <
> Computershare Limited <
> (Registration number 2000/006082/06) <
> 70 Marshall Street, Johannesburg, 2001 <
> PO Box 61051, Marshalltown, 2107 <
> www.aveng.co.za <
> Sponsor <
> J.P. Morgan Equities Limited <
> Date: 14/03/2012 08:20:01 Produced by the JSE SENS Department. <
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>